Canadian home sales decline for fourth month, expected to cool in 2017

Andrea Hopkins, Reuters

A new construction development offers real estate options for sale in the west end of Ottawa.
, THE CANADIAN PRESS IMAGES/Sean Kilpatrick

OTTAWA - Sales of existing Canadian homes fell in August, notching the fourth straight monthly decline, the Canadian Real Estate Association said on Thursday in a report that suggested Canada's long housing boom has begun to slow.

The industry group said sales fell 3.1 per cent in August from July, the largest monthly drop in nearly two years, as a tax on foreign buyers in Vancouver sent buyers to the sidelines and doused activity in Canada's most expensive market.

Actual sales, not seasonally adjusted, were up 10.2 per cent from August 2015, while CREA's Canadian home price index was up 14.7 per cent in August compared with the year before, reflecting the blockbuster pace of activity prior to the slowdown.

In a separate report, CREA also revised down its forecast for sales and prices in 2016 and 2017, suggesting Canada housing boom peaked in early 2016 and has begun to cool.

CREA said the drop in sales activity in August was driven in part by a sharp decline in British Columbia as the provincial government imposed a 15 per cent property transfer tax on foreign buyers of homes in Vancouver.

By contrast, sales in Ontario, the other large market, have held steady in recent months near record levels and have yet to show signs of cooling, the report showed.

“Single family homes sales were already cooling before the new land transfer tax on foreign home buyers in Metro Vancouver came into effect,” Gregory Klump, CREA’s chief economist, said in a statement. “The surprise announcement of the new tax caused sales to brake hard.”

Real estate groups and developers had largely opposed the tax on foreign buyers, but a voter backlash against wealthy investors, mostly from mainland China, had put pressure on government to do something to cool price appreciation in the already expensive market.

In its quarterly forecast, CREA said it projects national sales activity to rise 6.0 per cent in 2016 and average prices to climb 10.1 per cent to $487,800 this year. That forecast is slightly below one made three months ago, when a 6.1 per cent gain in sales and a 10.8 per cent rise in prices was projected.

It also trimmed its forecast for 2017, projecting a 0.6 per cent decline in national sales and a 0.2 per cent dip in prices. In June CREA had forecast sales to rise 0.2 per cent in 2017 from 2016 and prices to be inch up 0.1 per cent from 2016.